G.R. No.
138292 April 10, 2002
KOREA EXCHANGE BANK, petitioner,
vs.
FILKOR BUSINESS INTEGRATED, INC., KIM EUNG JOE,
and LEE HAN SANG, respondents.
QUISUMBING, J.:
This petition assails the order1 dated April 16, 1999 of the
Regional Trial Court of Cavite City, Branch 88, in Civil Case No.
N-6689. Said order denied petitioner's partial motion for
reconsideration of the trial court's order2 dated March 12, 1999
whereby respondents were ordered to pay petitioner various
sums of U.S. dollars as payment of the former's various loans
with interest but omitted to state that the property mortgaged as
security for said loans be foreclosed and sold at public auction
in case respondents fail to pay their obligations to petitioner
ninety days from entry of judgment.
The facts are summarized from the findings of the trial court.
On January 9, 1997, respondent Filkor Business Integrated, Inc.
(Filkor), borrowed US$140,000 from petitioner Korea Exchange
Bank, payable on July 9, 1997. Of this amount, only US$40,000
was paid by Filkor.3
In addition, Filkor executed nine trust receipts in favor of
petitioner, from June 26, 1997 to September 11, 1997. However,
Filkor failed to turn over to petitioner the proceeds from the sale
of the goods, or the goods themselves as required by the trust
receipts in case Filkor could not sell them.4
In the period from June 9, 1997 to October 1, 1997, Filkor also
negotiated to petitioner the proceeds of seventeen letters of
credit issued by the Republic Bank of New York and the Banque
Leumi France, S.A. to pay for goods which Filkor sold to
Segerman International, Inc. and Davyco, S.A. When petitioner
tried to collect the proceeds of the letters of credit by presenting
the bills of exchange drawn to collect the proceeds, they were
dishonored because of discrepancies.5
Prior to all the foregoing, in order to secure payment of all its
obligations, Filkor executed a Real Estate Mortgage on February
9, 1996. It mortgaged to petitioner the improvements belonging
to it constructed on the lot it was leasing at the Cavite Export
Processing Zone Authority.6 Respondents Kim Eung Joe and
Lee Han Sang also executed Continuing Suretyships binding
themselves jointly and severally with respondent Filkor to pay
for the latter's obligations to petitioner.7
As respondents failed to make good on their obligations,
petitioner filed Civil Case No. N-6689 in the Regional Trial Court
of Cavite City, docketed as "Korea Exchange Bank vs. Filkor
Business Integrated, Inc." In its complaint, petitioner prayed that
(a) it be paid by respondents under its twenty-seven causes of
action; (b) the property mortgaged be foreclosed and sold at
public auction in case respondents failed to pay petitioner within
ninety days from entry of judgment; and (c) other reliefs just and
equitable be granted.8
Petitioner moved for summary judgment pursuant to Section 1,
Rule 35 of the 1997 Rules of Civil Procedure. On March 12,
1999, the trial court rendered its order granting petitioner's
motion, reasoning as follows:
xxx
It appears that the only reason defendants deny all the
material allegations in the complaint is because the
documents attached thereto are mere photocopies and
not the originals thereof. Section 7, Rule 8 of the Rules
of Court allows copies of documents to be attached to
the pleading as an exhibit. Defendants are, therefore,
deemed to have admitted the genuineness and due
execution of all actionable documents attached to the
complaint inasmuch as they were not specifically
denied, pursuant to Section 8 of the Rule 8 of the Rules
of Court.
In the case at bar, there is clearly no substantial triable
issue, hence, the motion for summary judgment filed by
plaintiff is proper.
A summary of judgment is one granted by the court
upon motion by a party for an expeditious settlement of
the case, there appearing from the pleadings,
depositions, admissions and affidavits that there are no
important questions or issues of fact involved (except
as to the amount of damages) and that, therefore, the
moving party is entitled to a judgment as a matter of
law (Sections 1, 2, 3, Rule 35, 1997 Rules of Civil
Procedure).
The court having taken into account the pleadings of
the parties as well as the affidavits attached to the
motion for summary judgment and having found that
there is indeed no genuine issue as to any material fact
and that plaintiff is entitled to a summary of judgment
as a matter of law, hereby renders judgment for the
plaintiff and against the defendants, ordering said
defendants jointly and severally to pay plaintiff, as
follows…9
The trial court then rendered judgment in favor of petitioner,
granting its prayers under all its twenty-seven causes of action.
It, however, failed to order that the property mortgaged by
respondent Filkor be foreclosed and sold at public auction in the
event that Filkor fails to pay its obligations to petitioner.
Petitioner filed a motion for partial reconsideration of the trial
court's order, praying that the aforesaid relief of foreclosure and
sale at public auction be granted. In an order dated April 16,
1999, the trial court denied petitioner's motion, ruling as follows:
Plaintiff, in opting to file a civil action for the collection
of defendants obligations, has abandoned its mortgage
lien on the property subject of the real estate mortgage.
The issue has already been resolved in Danao vs.
Court of Appeals, 154 SCRA 446, citing Manila Trading
and Supply Co. vs. Co Kim, et al., 71 Phil. 448, where
the Supreme Court ruled that:
The rule is now settled that a mortgage
creditor may elect to waive his security and
bring, instead, an ordinary action to recover
the indebtedness with the right to execute a
judgment thereon on all the properties of the
debtor including the subject matter of the
mortgage, subject to the qualification that if he
 fails in the remedy by him elected, he cannot
pursue further the remedy he has waived.
WHEREFORE, the Partial Motion for Reconsideration
filed by the plaintiff of the Court's Order dated March
12, 1999 is hereby denied for lack of merit.
SO ORDERED.10
Hence, the present petition, where petitioner ascribes the
following error to the trial court.
THE REGIONAL TRIAL COURT OF CAVITE CITY
ERRED IN RULING THAT PETITIONER HAD
ABANDONED THE REAL ESTATE MORTGAGE IN
ITS FAVOR, BECAUSE IT FILED A SIMPLE
COLLECTION CASE.11
The resultant issue is whether or not petitioner's complaint
before the trial court was an action for foreclosure of a real estate
mortgage, or an action for collection of a sum of money. In
addition, we must also determine if the present appeal was
correctly lodged before us rather than with the Court of Appeals.
In petitioner's complaint before the trial court, Paragraph 183
thereof alleges:
183. To secure payment of the obligations of defendant
Corporation under the First to the Twenty-Seventh
Cause of Action, on February 9, 1996, defendant
Corporation executed a Real Estate Mortgage by virtue
of which it mortgaged to plaintiff the improvements
standing on Block 13, Lot 1, Cavite Export Processing
Zone, Rosario, Cavite, belonging to defendant
Corporation covered by Tax Declaration No. 5906-1
and consisting of a one-story building called
warehouse and spooling area, the guardhouse, the
cutting/sewing area building and the packing area
building. (A copy of the Real Estate Mortgage is
attached hereto as Annex "SS" and made an integral
part hereof.)12
This allegation satisfies in part the requirements of Section 1,
Rule 68 of the 1997 Rules of Civil Procedure on foreclosure of
real estate mortgage, which provides:
SECTION 1. Complaint in action for foreclosure. – In
an action for the foreclosure of a mortgage or other
encumbrance upon real estate, the complaint shall set
forth the date and due execution of the mortgage; its
assignments, if any; the names and residences of the
mortgagor and the mortgagee; a description of the
mortgaged property; a statement of the date of the note
or other documentary evidence of the obligation
secured by the mortgage, the amount claimed to be
unpaid thereon; and the names and residences of all
persons having or claiming an interest in the property
subordinate in right to that of the holder of the
mortgage, all of whom shall be made defendants in the
action.
In Paragraph 183 above, the date and due execution of the real
estate mortgage are alleged. The properties mortgaged are
stated and described therein as well. In addition, the names and
residences of respondent Filkor, as mortgagor, and of petitioner,
as mortgagee, are alleged in paragraphs 1 and 2 of the
complaint.13 The dates of the obligations secured by the
mortgage and the amounts unpaid thereon are alleged in
petitioner's first to twenty-seventh causes of action.14 Moreover,
the very prayer of the complaint before the trial court reads as
follows:
WHEREFORE, it is respectfully prayed that judgment
be rendered:
xxx
2. Ordering that the property mortgaged be foreclosed
and sold at public auction in case defendants fail to pay
plaintiff within ninety (90) days from entry of judgment.
x x x15
Petitioner's allegations in its complaint, and its prayer that the
mortgaged property be foreclosed and sold at public auction,
indicate that petitioner's action was one for foreclosure of real
estate mortgage. We have consistently ruled that what
determines the nature of an action, as well as which court or
body has jurisdiction over it, are the allegations of the complaint
and the character of the relief sought.16 In addition, we find no
indication whatsoever that petitioner had waived its rights under
the real estate mortgage executed in its favor. Thus, the trial
court erred in concluding that petitioner had abandoned its
mortgage lien on Filkor's property, and that what it had filed was
an action for collection of a sum of money.
Petitioner's action being one for foreclosure of real estate
mortgage, it was incumbent upon the trial court to order that the
mortgaged property be foreclosed and sold at public auction in
the event that respondent Filkor fails to pay its outstanding
obligations. This is pursuant to Section 2 of Rule 68 of the 1997
Rules of Civil Procedure, which provides:
SEC. 2. Judgment on foreclosure for payment or sale.-
If upon the trial in such action the court shall find the
facts set forth in the complaint to be true, it shall
ascertain the amount due to the plaintiff upon the
mortgage debt or obligation, including interest and
other charges as approved by the court, and costs,
and shall render judgment for the sum so found due
and order that the same be paid to the court or to the
judgment obligee within a period of not less than ninety
(90) days nor more than one hundred twenty (120)
days from entry of judgment, and that in default of such
payment the property shall be sold at public auction to
satisfy the judgment. (Italics supplied.)
Accordingly, the dispositive portion of the decision of the trial
court dated March 12, 1999, must be modified to comply with
the provisions of Section 2 of Rule 68 of the 1997 Rules of Civil
Procedure. This modification is subject to any appeal filed by
respondents of said decision.
On the propriety of the present appeal, we note that what
petitioner impugns is the determination by the trial court of the
nature of action filed by petitioner, based on the allegations in
the complaint. Such a determination as to the correctness of the
conclusions drawn from the pleadings undoubtedly involves a
question of law.17 As the present appeal involves a question of
law, petitioner appropriately filed it with this Court, pursuant to
Section 1 of Rule 45 of the 1997 Rules of Civil Procedure, which
provides:
 SECTION 1. Filing of petition with Supreme Court. – A
party desiring to appeal by certiorari from a judgment
or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the
Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law
which must be distinctly set forth. (Italics supplied).

There is no dispute with respect to the fact that when an appeal

raises only pure questions of law, this Court has jurisdiction to
entertain the same.18

WHEREFORE, the petition is GRANTED. The Order dated

March 12, 1999, of the Regional Trial Court of Cavite City,
Branch 88, in Civil Case No. N-6689 is hereby MODIFIED, to
state that the mortgaged property of respondent Filkor be
ordered foreclosed and sold at public auction in the event said
respondent fails to pay its obligations to petitioner within ninety
(90) days from entry of judgment.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 171868 July 27, 2011
SPOUSES FRANCISCO D. YAP and WHELMA S.
YAP, Petitioners,
vs.
SPOUSES ZOSIMO DY, SR. and NATIVIDAD CHIU DY,
SPOUSES MARCELINO MAXINO and REMEDIOS L.
MAXINO, PROVINCIAL SHERIFF OF NEGROS ORIENTAL
and DUMAGUETE RURAL BANK, INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171991
DUMAGUETE RURAL BANK, INC. (DRBI) herein
represented by Mr. William D.S. Dichoso, Petitioners,
vs.
SPOUSES ZOSIMO DY, SR. and NATIVIDAD CHIU DY,
SPOUSES MARCELINO MAXINO and REMEDIOS MAXINO,
and SPOUSES FRANCISCO D. YAP and WHELMA S.
YAP, Respondents.
DECISION
VILLARAMA, JR., J.:
May persons to whom several mortgaged lands were transferred
without the knowledge and consent of the creditor redeem only
several parcels if all the lands were sold together for a single
price at the foreclosure sale? This is the principal issue
presented to us for resolution in these two petitions for review
on certiorari assailing the May 17, 2005 Decision 1 and March 15,
2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. C.V.
No. 57205.
The antecedents are as follows:
The spouses Tomas Tirambulo and Salvacion Estorco
(Tirambulos) are the registered owners of several parcels of land
located in Ayungon, Negros Oriental, registered under Transfer
Certificate of Title (TCT) Nos. T-14794, T-14777, T-14780, T-
14781, T-14783 and T-20301 of the Registry of Deeds of Negros
Oriental, and more particularly designated as follows:
(1) TCT No. T-14777 Lot 1 of Plan Pcs-11728
(2) TCT No. T-20301 Lot 3 of Plan Psu-124376
(3) TCT No. T-14780 Lot 4 of Plan Pcs-11728
(4) TCT No. T-14794 Lot 5 of Plan Psu-124376
(5) TCT No. T-14781 Lot 6 of Plan Pcs-11728
(6) TCT No. T-14783 Lot 8 of Plan Pcs-11728
The Tirambulos likewise own a parcel of land denominated as
Lot 846, covered by Tax Declaration No. 08109.
On December 3, 1976, the Tirambulos executed a Real Estate
Mortgage3 over Lots 1, 4, 5, 6 and 8 in favor of the Rural Bank
of Dumaguete, Inc., predecessor of Dumaguete Rural Bank, Inc.
(DRBI), to secure a ₱105,000 loan extended by the latter to
them. Later, the Tirambulos obtained a second loan for ₱28,000
and also executed a Real Estate Mortgage4 over Lots 3 and 846
in favor of the same bank on August 3, 1978.
Subsequently, on October 27, 1979, the Tirambulos sold all
seven mortgaged lots to the spouses Zosimo Dy, Sr. and
Natividad Chiu (the Dys) and the spouses Marcelino C. Maxino
and Remedios Lasola (the Maxinos) without the consent and
knowledge of DRBI. This sale, which was embodied in a Deed
of Absolute Sale,5 was followed by a default on the part of the
Tirambulos to pay their loans to DRBI. Thus, DRBI extrajudicially
foreclosed the December 3, 1976 mortgage and had Lots 1, 4,
5, 6 and 8 sold at public auction on March 31, 1982.
At the auction sale, DRBI was proclaimed the highest bidder and
bought said lots for ₱216,040.93. The Sheriff’s Certificate of
Sale6 stated that the "sale is subject to the rights of redemption
of the mortgagor (s) or any other persons authorized by law so
to do, within a period of one (1) year from registration
hereof."7 The certificate of sale, however, was not registered
until almost a year later, or on June 24, 1983.
On July 6, 1983, or twelve (12) days after the sale was
registered, DRBI sold Lots 1, 3 and 6 to the spouses Francisco
D. Yap and Whelma D. Yap (the Yaps) under a Deed of Sale
with Agreement to Mortgage.8 It is important to note, however,
that Lot 3 was not among the five properties foreclosed and
bought by DRBI at public auction.
On August 8, 1983, or well within the redemption period, the
Yaps filed a Motion for Writ of Possession 9 alleging that they
have acquired all the rights and interests of DRBI over the
foreclosed properties and are entitled to immediate possession
of the same because the one-year redemption period has lapsed
without any redemption being made. Said motion, however, was
ordered withdrawn on August 22, 198310 upon motion of the
Yaps, who gave no reason therefor.11 Three days later, or on
August 25, 1983, the Yaps again filed a Motion for Writ of
Possession.12 This time the motion was granted, and a Writ of
Possession13 over Lots 1, 3 and 6 was issued in favor of the
Yaps on September 5, 1983. They were placed in possession of
Lots 1, 3 and 6 seven days later.
On May 22, 1984, roughly a month before the one-year
redemption period was set to expire, the Dys and the Maxinos
attempted to redeem Lots 1, 3 and 6. They tendered the amount
of ₱40,000.00 to DRBI and the Yaps,14 but both refused,
contending that the redemption should be for the full amount of
the winning bid of ₱216,040.93 plus interest for all the foreclosed
properties.
61,371 sq.m.
Thus, on May 28, 1984, the Dys and the Maxinos went to the
17,373
Office of the sq.m.
Sheriff of Negros Oriental and paid ₱50,625.29
(₱40,000.00 for the
27,875 sq.m.principal plus ₱10,625.29 for interests and
Sheriff’s Commission) to effect the redemption.15 Noticing that
Lot 3 was not included
2,900 sq.m. in the foreclosure proceedings, Benjamin
V. Diputado, Clerk of Court and Provincial Sheriff, issued a
Certificate 16,087 sq.m. 16 in favor of the Dys and the Maxinos
of Redemption
only for Lots 1 andsq.m
39,888 6, and stated in said certificate that Lot 3 is
not included in the foreclosure proceedings. By letter 17 of even
date, Atty. Diputado also duly notified the Yaps of the
redemption of Lots 1 and 6 by the Dys and the Maxinos, as well
as the non-inclusion of Lot 3 among the foreclosed properties.
He advised the Yaps to personally claim the redemption money
or send a representative to do so.
In a letter to the Provincial Sheriff on May 31, 1984, the Yaps
refused to take delivery of the redemption price arguing that one
of the characteristics of a mortgage is its indivisibility and that
one cannot redeem only some of the lots foreclosed because all
the parcels were sold for a single price at the auction sale. 18
On June 1, 1984, the Provincial Sheriff wrote the Dys and the
Maxinos informing them of the Yaps’ refusal to take delivery of
the redemption money and that in view of said development, the
tender of the redemption money was being considered as a
consignation.19
On June 15, 1984, the Dys and the Maxinos filed Civil Case No.
8426 with the Regional Trial Court of Negros Oriental for
accounting, injunction, declaration of nullity (with regard to Lot
3) of the Deed of Sale with Agreement to Mortgage, and
damages against the Yaps and DRBI. In their complaint,20 they
prayed
a) That the Deed of Sale With Agreement to Mortgage
… be declared null and void ab initio;
b) That defendant Yap[s’] possession of Lot No. 3, TCT
No. T20301 based as it was on a void sale, be declared
illegal from the very beginning;
c) That defendants be ordered to render to plaintiffs a
fair accounting of the harvests and income which
defendants made from said Lot No. 3 and, in addition,
be ordered to pay to plaintiffs damages for wrongfully
depriving plaintiffs of the use and enjoyment of said
property;
d) That the redemption which plaintiffs made of Lot No.
1, TCT No. 14777, and Lot No. 6, TCT No. 14781,
through the Provincial Sheriff of Negros Oriental, be
declared valid and binding on the defendants, thereby
releasing and freeing said parcels of land from
whatever liens or claims that said defendants might
have on them;
e) That defendants be likewise ordered to render to
plaintiffs full and fair accounting of all the harvests,
fruits, and income that they or either of them might
have derived from said two parcels of land starting from
the time defendant Yap first took possession thereof
and harvested the coconuts in September, 1983;
f) That, after the accounting herein prayed for,
defendants be required to deliver to plaintiffs the net
proceeds of the income from the three parcels of land
subject of this case, together with interest at the legal
rate;
g) That for his acts of misrepresentation and deceit in
obtaining a writ of possession over the three parcels of
land subject of this case, and for the highly irregular
and anomalous procedures and maneuvers employed
by defendant Yap in securing said writ, as well as for
harvesting the coconuts even after knowing that
plaintiffs had already fully redeemed the properties in
question and, with respect to Lot No. 3, after knowing
that the same was not in fact included in the foreclosure
and, therefore, could not have been validly sold by the
bank to him, said defendant Yap be condemned to pay
plaintiffs moral damages in the amount of ₱200,000.00,
plus punitive and exemplary damages in the amount of
₱100,000.00;
h) That for falsifying the Sheriff’s Certificate of Sale and
selling unlawfully Lot No. 3, TCT No. T-20301, to its co-
defendant Yap, defendant DRBI be condemned to pay
to plaintiffs actual damages in the amount of
₱50,000.00; moral damages in the amount of
₱200,000.00; and punitive and exemplary damages in
the amount of ₱100,000.00;
i) That defendants be condemned to pay solidarily to
plaintiffs attorney’s fees in the amount of ₱50,000.00;
other legitimate expenses of litigation in the amount of
₱30,000.00; and the costs of suit;
j) That pending hearing of this case, a writ of
preliminary injunction be issued enjoining and
restraining the defendants, particularly defendant Yap,
from disturbing and interfering the plaintiffs’ possession
and other rights of ownership over the land in question;
k) That pending hearing of the petition for preliminary
injunction, a temporary restraining order be issued
against the defendants, particularly against defendant
Yap, to serve the same purpose for which the writ of
preliminary injunction is herein prayed for; and
l) That, after hearing of the main case, said preliminary
injunction be made permanent.
Furthermore, plaintiffs pray for all other reliefs which may be just
and equitable in the premises.21
Thereafter, on June 19, 1984, the Dys and the Maxinos
consigned to the trial court an additional sum of ₱83,850.50 plus
sheriff’s commission fee of ₱419.25 representing the remaining
balance of the purchase price that the Yaps still owed DRBI by
virtue of the sale to them by the DRBI of Lots 1, 3 and 6. 22
Meanwhile, by letter23 dated June 27, 1984, the Yaps told DRBI
that no redemption has been made by the Tirambulos or their
successors-in-interest and requested DRBI to consolidate its
title over the foreclosed properties by requesting the Provincial
Sheriff to execute the final deed of sale in favor of the bank so
that the latter can transfer the titles of the two foreclosed
properties to them.
On the same date, the Yaps also wrote the Maxinos informing
the latter that during the last harvest of the lots bought from
DRBI, they excluded from the harvest Lot 3 to show their good
faith. Also, they told the Maxinos that they were formally turning
over the possession of Lot 3 to the Maxinos, without prejudice
to the final determination of the legal implications concerning Lot
3. As to Lots 1 and 6, however, the Yaps stated that they
intended to consolidate ownership over them since there has
been no redemption as contemplated by law. Included in the
letter was a liquidation of the copra proceeds harvested from
September 7, 1983 to April 30, 1984 for Lots 1, 3 and 6.24
Later, on July 5, 1984, the Yaps filed Civil Case No. 8439 for
consolidation of ownership, annulment of certificate of
redemption, and damages against the Dys, the Maxinos, the
Provincial Sheriff of Negros Oriental and DRBI. In their
complaint,25 the Yaps prayed
1. That [they] be declared the exclusive owners of Lot
No. 1 covered by TCT No. T-14777 and Lot No. 6
covered by TCT No. T-14781 for failure on the part of
defendants Zosimo Dy, Sr., and Marcelino Maxino to
redeem the properties in question within one (1) year
from the auction sale.
 2. That defendants be [declared] solidarily liable to pay
moral damages in the amount of ONE HUNDRED
THOUSAND PESOS (₱100,000.00), THIRTY[-]FIVE
THOUSAND PESOS (₱35,000.00) as attorney’s fees
and FIFTEEN THOUSAND PESOS (₱15,000.00) as
exemplary damages;
3. That the Provincial Sheriff be required to execute the
final Deed of Sale in favor of the bank and the bank be
in turn required to transfer the property to the plaintiffs
in accordance with the Deed of Sale with Mortgage.
4. That the court grant such other relief as may be
deemed just and equitable under the premises.26
Civil Case Nos. 8426 and 8439 were tried jointly.
On October 24, 1985, the Yaps, by counsel, filed a motion to
withdraw from the provincial sheriff the redemption money
amounting to ₱50,373.42.27 Said motion was granted on
October 28, 1985 after a Special Power of Attorney executed by
Francisco Yap in favor of his brother Valiente Yap authorizing
the latter to receive the ₱50,373.42 redemption money was
presented in court.28
On February 12, 1997, the trial court rendered decision29 in favor
of the Yaps. The fallo reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Dismissing the complaint of Dy and Maxino spouses
in Civil Case No. 8426 as well as the bank and the Yap
spouses counterclaim for lack of factual and legal
basis;
2. In Civil Case No. 8439:
a) Declaring the Yap spouses, plaintiffs
therein, the exclusive owners of Lot No. 1
covered by TCT No. T-14777 and Lot No. 6
covered by TCT No. T-14781 for failure on the
part of the Dy and Maxino spouses,
defendants therein, to redeem the properties
in question within one (1) year from the
auction sale.
b) Directing the Provincial Sheriff of Negros
Oriental to execute the Final Deed of Sale in
favor of the bank and the latter to transfer the
subject properties to the Yap spouses in
accordance with the Deed of Sale With
Mortgage….
SO ORDERED.30
On March 7, 1997, the trial court amended the above dispositive
portion upon motion of DRBI, as follows:
Wherefore, judgment is hereby rendered as follows:
1. The Certificate of Redemption issued by the
Provincial Sheriff (Exh. "M") is hereby declared null and
void;
2. The Provincial Sheriff of Negros Oriental is hereby
ordered to execute a Final Deed of Sale of the
foreclosed properties in favor of the defendant
Dumaguete Rural Bank, Inc., subject to the rights of the
Yap spouses acquired in accordance with the Deed of
Sale with Mortgage…;
3. The Deed of Sale dated [October] 27, 1979, made
by Tirambulo and Estorco in favor of the Dys and
Maxinos covering all the seven (7) parcels of land in
question, is hereby declared null and void;
4. In Civil Case No. 8439, declaring the Yap Spouses,
the exclusive owners of Lot No. 1, covered by TCT No.
T-14777, and Lot No. 6, covered by TCT No. T-14781,
for failure on the part of the Dy and Maxino Spouses,
to redeem said properties within one (1) year from the
date of the registration of the auction sale;
5. All other claims and counterclaims are hereby
dismissed for lack of merit.
SO ORDERED.31
The trial court held that the Dys and the Maxinos failed to
formally offer their evidence; hence, the court could not consider
the same. It also upheld the Deed of Sale with Agreement to
Mortgage between the Yaps and DRBI, ruling that its
genuineness and due execution has been admitted by the Dys
and the Maxinos and that it is not contrary to law, morals, good
customs, public policy or public order. Thus, ownership of Lots
1, 3 and 6 was transferred to the Yaps.
The trial court further held that the Dys and the Maxinos failed
to exercise their rights of redemption properly and timely. They
merely deposited the amount of ₱50,625.29 with the Sheriff,
whereas the amount due on the mortgage deed is ₱216,040.93.
Aggrieved by the above ruling, the Dys and the Maxinos
elevated the case to the CA. They argued that the trial court
erred in:
1) ... failing to consider plaintiffs’ evidence [testimonial,
including the testimony of the Provincial Sheriff of
Negros Oriental (Attorney Benjamin V. Diputado) and
plaintiff Attorney Marcelino C. Maxino] and
documentary [Exhibits A through TT (admitted under
Order of 3 March 1995)];
2) …failing to declare void or annul the purported
contract of sale by Dumaguete Rural Bank, Inc. to
Francisco D. Yap and Whelma S. Yap of Lots 1, 3, and
6, during the redemption period [the purported seller
(bank) not being the owner thereof, and Lot 3 not being
included in the foreclosure/auction sale and could not
have been acquired by the Bank thereat];
3) …not holding that the parcels of land had been
properly and validly redeemed in good faith, defendant
Yap, the Provincial Sheriff, the Clerk of Court, and Mr.
Mario Dy, having accepted redemption/consignation
(or, in not fixing the redemption price and allowing
redemption);
4) …not holding that by withdrawing the redemption
money consigned/deposited by plaintiffs to the Court,
and turning over possession of the parcels of land to
plaintiffs, defendants Yap accepted, ratified, and
confirmed redemption by plaintiffs of the parcels of land
acquired at foreclosure/auction sale by the Bank and
purportedly sold by it to and purchased by Yap;
5) …not finding and holding that all the parcels of land
covered by the foreclosed mortgage held by
Dumaguete Rural Bank had been acquired by and are
in the possession of plaintiffs as owners and that
defendants bank and Yap had disposed of and/or lost
their rights and interests and/or any cause of action and
their claims had been extinguished and mooted or
otherwise settled, waived and/or merged in plaintiffs-
appellants;
6) …not holding that defendants Yap have no cause of
action to quiet title as they had no title or possession of
the parcels of land in question and in declaring
defendants Yap spouses the exclusive owners of Lot
No. 1 covered by TCT No. T-14777 and Lot No. 6
covered by TCT No. T-14781 and in directing the
Provincial Sheriff to execute the final deed of sale in
favor of the bank and the latter to transfer the subject
properties to the Yap spouses in accordance with the
Deed of Sale with Mortgage which included Lot No. 3
which was not foreclosed by the Sheriff and was not
included in the certificate of sale issued by him and
despite their acceptance, ratification, and confirmation
of the redemption as well as acknowledgment of
possession of the parcels of land by plaintiffs;
7) …issuing an amended decision after perfection of
plaintiff’s appeal and without waiting for their comment
(declaring the Certificate of Redemption issued by the
Provincial Sheriff (Exh. "M") null and void; ordering the
Provincial Sheriff of Negros Oriental to execute a Final
Deed of Sale of the foreclosed properties in favor of the
defendant Dumaguete Rural Bank, Inc., subject to the
rights of the Yap spouses acquired in accordance with
the Deed of Sale with Mortgage (Exh. "B"-Maxino and
Dy; Exh. "1" –Yap); declaring null and void the Deed of
Sale dated Oct[ober] 27, 1979, made by Tirambulo and
Estorco in favor of the Dys and Maxinos covering all
the seven (7) parcels of land in question; in Civil Case
No. 8439, declaring the Yap spouses, the exclusive
owners of Lot No. 1, covered by TCT No. T-14777, and
Lot No. 6, covered by TCT No. T-14781, for failure on
the part of the Dy and Maxino spouses, to redeem said
properties within (1) year from the date of registration
of the auction sale) after plaintiffs had perfected appeal
of the 12 February 1997 decision, without hearing or
awaiting plaintiffs’ comment, and in the face of the
records showing that the issues were never raised,
much less litigated, insofar as Tirambulo, as well in the
face of the foregoing circumstances, especially
dismissal of defendants’ claims and counterclaims and
acquisition of ownership and possession of the parcels
of land by plaintiffs as well as disposition and/or loss of
defendants rights and interests and cause of action in
respect thereof and/or settlement, waiver, and/or
extinguishment of their claims, and merger in plaintiffs-
appellants, and without stating clearly the facts and the
law upon which it is based[; and]
8) …not finding, holding and ruling that defendants
acted in bad faith and in an abusive and oppressive
manner, if not contrary to law; and in not awarding
plaintiffs damages.32
On May 17, 2005, the CA rendered a decision reversing the
March 7, 1997 amended decision of the trial court. The
dispositive portion of the assailed CA decision reads:
IN LIGHT OF THE FOREGOING, this appeal is GRANTED. The
decision as well as the amended decision of the Regional Trial
Court is REVERSED AND SET ASIDE. In lieu thereof[,]
judgment is hereby rendered as follows:
1. Declaring the sale made by Dumaguete Rural Bank
Inc. to Sps. Francisco and Whelma Yap with respect to
Lot No. 3 under TCT No. T-20301 as null and void;
2. Declaring the redemption made by Spouses Dy and
Spouses Maxino with regards to Lot No. 6 under TCT
No. T-14781 and Lot No. 1 under TCT No. [T-]14777
as valid;
3. Ordering defendants, Sps. Yap, to deliver the
possession and ownership thereof to Sps. Dy and Sps.
Maxino; to give a fair accounting of the proceeds of
these three parcels of land and to tender and deliver
the corresponding amount of income from October 24,
1985 until the finality of this judgment[; and]
4. Condemning the defendant bank to pay damages to
Spouses Dy and Spouses Maxino the amount of
₱20,000.00 as moral damages and ₱200,000.00 as
exemplary damages and attorney’s fees in the amount
of ₱50,000.00.
All other claims are dismissed.
Costs against the appellees.
SO ORDERED.33
The CA held that the trial court erred in ruling that it could not
consider the evidence for the Dys and the Maxinos allegedly
because they failed to formally offer the same. The CA noted
that although the testimonies of Attys. Marcelino C. Maxino and
Benjamin V. Diputado were not formally offered, the procedural
lapse was cured when the opposing counsel cross-examined
said witnesses. Also, while the original TSNs of the witnesses
for the plaintiffs in Civil Case No. 8426 were burned, the latter’s
counsel who had copies thereof, furnished the Yaps copies for
their scrutiny and comment. The CA further noted that the trial
court also admitted all the documentary exhibits of the Dys and
the Maxinos on March 3, 1995. Unfortunately, however, the trial
court simply failed to locate the pertinent documents in the
voluminous records of the cases.
On the merits, the CA ruled that the Dys and the Maxinos had
proven their cause of action sufficiently. The CA noted that their
claim that Lot 3 was not among the properties foreclosed was
duly corroborated by Atty. Diputado, the Provincial Sheriff who
conducted the foreclosure sale. The Yaps also failed to rebut
their contention regarding the former’s acceptance of the
redemption money and their delivery of the possession of the
three parcels of land to the Dys and the Maxinos. The CA also
noted that not only did the Yaps deliver possession of Lot 3 to
the Dys and the Maxinos, they also filed a Motion to Withdraw
the Redemption Money from the Provincial Sheriff and withdrew
the redemption money.
As to the question whether the redemption was valid or not, the
CA found no need to discuss the issue. It found that the bank
was in bad faith and therefore cannot insist on the protection of
the law regarding the need for compliance with all the
requirements for a valid redemption while estoppel and unjust
enrichment operate against the Yaps who had already
withdrawn the redemption money.
Upon motion for reconsideration of the Yaps, however, the CA
amended its decision on March 15, 2006 as follows:
IN LIGHT OF THE FOREGOING, this appeal is GRANTED. The
decision as well as the amended decision of the Regional Trial
Court is REVERSED AND SET ASIDE. In lieu thereof[,]
judgment is hereby rendered as follows:
1.Declaring the sale made by Dumaguete Rural Bank
Inc. to Sps. Francisco and Whelma Yap with respect to
Lot No. 3 under TCT No. T-20301 null and void;
2.Declaring the redemption made by Spouses Dy and
Spouses Maxino with regards to Lot No. 6 under TCT
No. T-14781 and Lot No. 1 under TCT No. [T-]14777
as valid;
3. Condemning the defendant bank to pay damages to
Spouses Dy and Spouses Maxino the amount of
₱20,000.00 as moral damages and ₱200,000.00 as
exemplary damages and attorney’s fees in the amount
of ₱50,000.00.
All other claims are dismissed.
Costs against the appellees.
SO ORDERED.34
Hence, the consolidated petitions assailing the appellate court’s
decision.
The Yaps argue in the main that there is no valid redemption of
the properties extrajudicially foreclosed. They contend that the
₱40,000.00 cannot be considered a valid tender of redemption
since the amount of the auction sale is ₱216,040.93. They also
argue that a valid tender of payment for redemption can only be
made to DRBI since at that time, their rights were subordinate to
the final consolidation of ownership by the bank.
DRBI, aside from insisting that all seven mortgaged properties
(which thus includes Lot 3) were validly foreclosed, argues, for
its part, that the appellate court erred in sustaining the
redemption made by the Dys and Maxinos. It anchors its
argument on the fact that the sale of the Tirambulos to the Dys
and Maxinos was without the bank’s consent. The Dys and
Maxinos therefore could not have assumed the character of
debtors because a novation of the contract of mortgage between
the Tirambulos and DRBI did not take place as such a novation
is proscribed by Article 1293 of the Civil Code. And there being
no valid redemption within the contemplation of law and DRBI
being the highest bidder during the auction sale, DRBI has
become the absolute owner of the properties mortgaged when
the redemption period expired.
DRBI further argues that it was unfair and unjust for them to be
held liable for damages for supposedly wrongfully foreclosing on
Lot 3, depriving the Dys and the Maxinos of the use of the land,
and registering the Certificate of Sale which included Lot 3 when
it should have excluded the same. DRBI argues that as a
juridical person, it only authorized and consented, through its
Board of Directors, to lawful processes. The unlawful acts of the
Sheriff, who is considered as an agent of the bank in the
foreclosure proceedings, cannot bind DRBI. Moreover, DRBI
cannot be liable for damages on the basis of an affidavit that was
submitted only before the CA as the bank had no chance to
cross-examine the affiant and determine the veracity and
propriety of the statements narrated in said affidavit.
Thus, the issues to be resolved in the instant case are
essentially as follows: (1) Is Lot 3 among the foreclosed
properties? (2) To whom should the payment of redemption
money be made? (3) Did the Dys and Maxinos validly redeem
Lots 1 and 6? and (4) Is DRBI liable for damages?
As to the first issue, we find that the CA correctly ruled that the
Dys and Maxinos were able to prove their claim that Lot 3 was
not among the properties foreclosed and that it was merely
inserted by the bank in the Sheriff’s Certificate of Sale. As Atty.
Diputado, the Provincial Sheriff, testified, the application for
foreclosure was only for five parcels of land, namely, Lots 1, 4,
5, 6 and 8. Accordingly, only said five parcels of land were
included in the publication and sold at the foreclosure sale.
When he was shown a copy of the Sheriff’s Certificate of Sale
consisting of three pages, he testified that it was altered because
Lot 3 and Lot 846 were included beyond the "xxx" that marked
the end of the enumeration of the lots foreclosed.35 Also, a
perusal of DRBI’s application for foreclosure of real estate
mortgage36 shows that it explicitly refers to only one deed of
mortgage to settle the Tirambulos’ indebtedness amounting to
₱216,040.93. This is consistent with the Notice of Extrajudicial
Sale of Mortgaged Property, published in the Dumaguete Star
Informer on February 18, 25 and March 4, 1982,37 announcing
the sale of Lots 1, 4, 5, 6 and 8 for the satisfaction of the
indebtedness amounting to ₱216,040.93. It is also consistent
with the fact that Lots 1, 4, 5, 6 and 8 are covered by only one
real estate mortgage, the Real Estate Mortgage 38 dated
December 3, 1976. Indeed, that the foreclosure sale refers only
to Lots 1, 4, 5, 6 and 8 is clear from the fact that Lots 1, 4, 5, 6
and 8 and Lot 3 are covered by two separate real estate
mortgages. DRBI failed to refute these pieces of evidence
against it.
As to the second issue regarding the question as to whom
payment of the redemption money should be made, Section
31,39 Rule 39 of the Rules of Court then applicable provides:
SEC. 31. Effect of redemption by judgment debtor, and a
certificate to be delivered and recorded thereupon. To whom
payments on redemption made.—If the judgment debtor
redeem, he must make the same payments as are required to
effect a redemption by a redemptioner, whereupon the effect of
the sale is terminated and he is restored to his estate, and the
person to whom the payment is made must execute and deliver
to him a certificate of redemption acknowledged or approved
before a notary public or other officer authorized to take
acknowledgments of conveyances of real property. Such
certificate must be filed and recorded in the office of the registrar
of deeds of the province in which the property is situated, and
the registrar of deeds must note the record thereof on the margin
of the record of the certificate of sale. The payments mentioned
in this and the last preceding sections may be made to the
purchaser or redemptioner, or for him to the officer who made
the sale. (Emphasis supplied.)
Here, the Dys and the Maxinos complied with the above-quoted
provision. Well within the redemption period, they initially
attempted to pay the redemption money not only to the
purchaser, DRBI, but also to the Yaps. Both DRBI and the Yaps
however refused, insisting that the Dys and Maxinos should pay
the whole purchase price at which all the foreclosed properties
were sold during the foreclosure sale. Because of said refusal,
the Dys and Maxinos correctly availed of the alternative remedy
by going to the sheriff who made the sale. As held in Natino v.
Intermediate Appellate Court,40 the tender of the redemption
money may be made to the purchaser of the land or to the
sheriff. If made to the sheriff, it is his duty to accept the tender
and execute the certificate of redemption.
But were the Dys and Maxinos entitled to redeem Lots 1 and 6
in the first place? We rule in the affirmative.
The Dys and the Maxinos have legal personality to redeem
the subject properties.
Contrary to petitioners’ contention, the Dys and Maxinos have
legal personality to redeem the subject properties despite the
fact that the sale to the Dys and Maxinos was without DRBI’s
consent. In Litonjua v. L & R Corporation,41 this Court declared
valid the sale by the mortgagor of mortgaged property to a third
person notwithstanding the lack of written consent by the
mortgagee, and likewise recognized the third person’s right to
redeem the foreclosed property, to wit:
Coming now to the issue of whether the redemption offered by
PWHAS on account of the spouses Litonjua is valid, we rule in
the affirmative. The sale by the spouses Litonjua of the
mortgaged properties to PWHAS is valid. Therefore, PWHAS
stepped into the shoes of the spouses Litonjua on account of
such sale and was in effect, their successor-in-interest. As such,
it had the right to redeem the property foreclosed by L & R
Corporation. Again, Tambunting, supra, clarifies that –
"x x x. The acquisition by the Hernandezes of the Escuetas’
rights over the property carried with it the assumption of the
obligations burdening the property, as recorded in the Registry
of Property, i.e., the mortgage debts in favor of the RFC (DBP)
and the Tambuntings. The Hernandezes, by stepping into the
Escuetas’ shoes as assignees, had the obligation to pay the
mortgage debts, otherwise, these debts would and could be
enforced against the property subject of the assignment. Stated
otherwise, the Hernandezes, by the assignment, obtained the
right to remove the burdens on the property subject thereof by
paying the obligations thereby secured; that is to say, they had
the right of redemption as regards the first mortgage, to be
exercised within the time and in the manner prescribed by law
and the mortgage deed; and as regards the second mortgage,
sought to be judicially foreclosed but yet unforeclosed, they had
the so-called equity of redemption."
The right of PWHAS to redeem the subject properties finds
support in Section 6 of Act 3135 itself which gives not only the
mortgagor-debtor the right to redeem, but also his successors-
in-interest. As vendee of the subject properties, PWHAS
qualifies as such a successor-in-interest of the spouses
Litonjua.42
Likewise, we rule that the Dys and the Maxinos validly redeemed
Lots 1 and 6.
The requisites of a valid redemption are present
The requisites for a valid redemption are: (1) the redemption
must be made within twelve (12) months from the time of the
registration of the sale in the Office of the Register of Deeds; (2)
payment of the purchase price of the property involved, plus 1%
interest per month thereon in addition, up to the time of
redemption, together with the amount of any assessments or
taxes which the purchaser may have paid thereon after the
purchase, also with 1% interest on such last named amount; and
(3) written notice of the redemption must be served on the officer
who made the sale and a duplicate filed with the Register of
Deeds of the province.43
There is no issue as to the first and third requisites. It is
undisputed that the Dys and the Maxinos made the redemption
within the 12-month period from the registration of the sale. The
Dys and Maxinos effected the redemption on May 24, 1984,
when they deposited ₱50,373.42 with the Provincial Sheriff, and
on June 19, 1984, when they deposited an additional
₱83,850.50. Both dates were well within the one-year
redemption period reckoned from the June 24, 1983 date of
registration of the foreclosure sale. Likewise, the Provincial
Sheriff who made the sale was properly notified of the
redemption since the Dys and Maxinos deposited with him the
redemption money after both DRBI and the Yaps refused to
accept it.
The second requisite, the proper redemption price, is the main
subject of contention of the opposing parties.
The Yaps argue that ₱40,000.00 cannot be a valid tender of
redemption since the amount of the auction sale was
₱216,040.93. They further contend that the mortgage is
indivisible so in order for the tender to be valid and effectual, it
must be for the entire auction price plus legal interest.
We cannot subscribe to the Yaps’ argument on the indivisibility
of the mortgage. As held in the case of Philippine National Bank
v. De los Reyes,44 the doctrine of indivisibility of mortgage does
not apply once the mortgage is extinguished by a complete
foreclosure thereof as in the instant case. The Court held:
The parties were accordingly embroiled in a hermeneutic
disparity on their aforesaid contending positions. Yet, the rule on
the indivisibility of mortgage finds no application to the case at
bar. The particular provision of the Civil Code referred to
provides:
Art. 2089. A pledge or mortgage is indivisible, even though the
debt may be divided among the successors in interest of the
debtor or of the creditor.
Therefore, the debtor’s heir who has paid a part of the debt
cannot ask for the proportionate extinguishment of the pledge or
mortgage as long as the debt is not completely satisfied.
Neither can the creditor’s heir who received his share of the debt
return the pledge or cancel the mortgage, to the prejudice of the
other heirs who have not been paid.
From these provisions is excepted the case in which, there being
several things given in mortgage or pledge, each one of these
guarantees only a determinate portion of the credit.
The debtor, in this case, shall have a right to the extinguishment
of the pledge or mortgage as the portion of the debt for which
each thing is specially answerable is satisfied.
From the foregoing, it is apparent that what the law proscribes
is the foreclosure of only a portion of the property or a number
of the several properties mortgaged corresponding to the unpaid
portion of the debt where before foreclosure proceedings partial
payment was made by the debtor on his total outstanding loan
or obligation. This also means that the debtor cannot ask for the
release of any portion of the mortgaged property or of one or
some of the several lots mortgaged unless and until the loan
thus, secured has been fully paid, notwithstanding the fact that
there has been a partial fulfillment of the obligation. Hence, it is
provided that the debtor who has paid a part of the debt cannot
ask for the proportionate extinguishment of the mortgage as long
as the debt is not completely satisfied.
That the situation obtaining in the case at bar is not within the
purview of the aforesaid rule on indivisibility is obvious since the
aggregate number of the lots which comprise the collaterals for
the mortgage had already been foreclosed and sold at public
auction. There is no partial payment nor partial extinguishment
of the obligation to speak of. The aforesaid doctrine, which is
actually intended for the protection of the mortgagee, specifically
refers to the release of the mortgage which secures the
satisfaction of the indebtedness and naturally presupposes that
the mortgage is existing. Once the mortgage is extinguished by
a complete foreclosure thereof, said doctrine of indivisibility
ceases to apply since, with the full payment of the debt, there is
nothing more to secure.45 (Emphasis supplied.)
Nothing in the law prohibits the piecemeal redemption of
properties sold at one foreclosure proceeding. In fact, in several
early cases decided by this Court, the right of the mortgagor or
redemptioner to redeem one or some of the foreclosed
properties was recognized.
In the 1962 case of Castillo v. Nagtalon,46 ten parcels of land
were sold at public auction. Nagtalon, who owned three of the
ten parcels of land sold, wanted to redeem her properties.
Though the amount she tendered was found as insufficient to
effectively release her properties, the Court held that the tender
of payment was made timely and in good faith and thus, in the
interest of justice, Nagtalon was given the opportunity to
complete the redemption purchase of three of the ten parcels of
land foreclosed.
Also, in the later case of Dulay v. Carriaga,47 wherein Dulay
redeemed eight of the seventeen parcels of land sold at public
auction, the trial court declared the piecemeal redemption of
Dulay as void. Said order, however, was annulled and set aside
by the Court on certiorari and the Court upheld the redemption
of the eight parcels of land sold at public auction.
Clearly, the Dys and Maxinos can effect the redemption of even
only two of the five properties foreclosed. And since they can
effect a partial redemption, they are not required to pay the
₱216,040.93 considering that it is the purchase price for all the
five properties foreclosed.
So what amount should the Dys and Maxinos pay in order for
their redemption of the two properties be deemed valid
considering that when the five properties were auctioned, they
were not separately valued?
Contrary to the Yaps’ contention, the amount paid by the Dys
and Maxinos within the redemption period for the redemption
of just two parcels of land was not only ₱40,000.00 but totaled
to ₱134,223.92 (₱50,373.42 paid on May 28, 1984 plus
₱83,850.50 paid on June 19, 1984). That is more than 60% of
the purchase price for the five foreclosed properties, to think the
Dys and Maxinos were only redeeming two properties. We find
that it can be considered a sufficient amount if we were to base
the proper purchase price on the proportion of the size of Lots 1
and 6 with the total size of the five foreclosed properties, which
had the following respective sizes:
Lot 1 61,371 square meters
Lot 6 16,087 square meters
Lot 5 2,900 square meters
Lot 4 27,875 square meters
Lot 8 39,888 square meters
TOTAL 148,121 square meters
The two subject properties to be redeemed, Lots 1 and 6, have
a total area of 77,458 square meters or roughly 52% of the total
area of the foreclosed properties. Even with this rough
approximation, we rule that there is no reason to invalidate the
redemption of the Dys and Maxinos since they tendered 60% of
the total purchase price for properties constituting only 52% of
the total area. However, there is a need to remand the case for
computation of the pro-rata value of Lots 1 and 6 based on their
true values at that time of redemption for the purposes of
determining if there is any deficiency or overpayment on the part
of the Dys and Maxinos.
As to the award of damages in favor of the Dys and Maxinos, we
agree with the appellate court for granting the same.
The CA correctly observed that the act of DRBI in falsifying the
Sheriff’s Certificate of Sale to include Lots 3 and 846, even if
said additional lots were not among the properties foreclosed,
was the proximate cause of the pecuniary loss suffered by the
Dys and Maxinos in the form of lost income from Lot 3.
Likewise, the CA also correctly awarded moral damages.
Paragraph 10, Article 2219 of the Civil Code provides that moral
damages may be recovered in case of acts and actions referred
to in Article 21 of the same Code. Article 21 reads:
ART. 21 Any person who willfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for the damage.
As previously discussed, DRBI’s act of maliciously including two
additional properties in the Sheriff’s Certificate of Sale even if
they were not included in the foreclosed properties caused the
Dys and Maxinos pecuniary loss. Hence, DRBI is liable to pay
moral damages.
The award of exemplary damages is similarly proper. Exemplary
or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.48 We cannot
agree more with the following ratio of the appellate court in
granting the same:

Additionally, what is alarming to the sensibilities of the Court is

the deception employed by the bank in adding other properties
in the certificate of sale under public auction without them being
included in the public auction conducted. It cannot be
overemphasized that being a lending institution, prudence
dictates that it should employ good faith and due diligence with
the properties entrusted to it. It was the bank which submitted
the properties ought to be foreclosed to the sheriff. It only
submitted five (5) properties for foreclosure. Yet, it caused the
registration of the Certificate of Sale under public auction which
listed more properties than what was foreclosed. On this aspect,
exemplary damages in the amount of ₱200,000.00 are in
order.49

There being an award of exemplary damages, the award of

attorney’s fees is likewise proper as provided in paragraph 1,
Article 2208 of the Civil Code.

WHEREFORE, the petitions for review on certiorari are DENIED

for lack of merit. The Decision dated May 17, 2005 and
Resolution dated March 15, 2006 of the Court of Appeals in CA-
G.R. C.V. No. 57205 are hereby AFFIRMED with the
MODIFICATION that the case is REMANDED to the Regional
Trial Court of Negros Oriental, Branch 44, Dumaguete City, for
the computation of the pro-rata value of properties covered by
TCT No. T-14777 (Lot 1) and TCT No. T-14781 (Lot 6) of the
Registry of Deeds of Negros Oriental at the time of redemption
to determine if there is a deficiency to be settled by or
overpayment to be refunded to respondent Spouses Zosimo Dy,
Sr. and Natividad Chiu and Spouses Marcelino C. Maxino and
Remedios Lasola with regard to the redemption money they
paid.

With costs against the petitioners.

SO ORDERED.
G.R. No. 176019 January 12, 2011
BPI FAMILY SAVINGS BANK, INC., Petitioner,
vs.
GOLDEN POWER DIESEL SALES CENTER, INC. and
RENATO C. TAN, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 13 March 2006 Decision2 and
19 December 2006 Resolution3 of the Court of Appeals in CA-
G.R. SP No. 78626. In its 13 March 2006 Decision, the Court of
Appeals denied petitioner BPI Family Savings Bank, Inc.ʼs (BPI
Family) petition for mandamus and certiorari. In its 19 December
2006 Resolution, the Court of Appeals denied BPI Familyʼs
motion for reconsideration.
The Facts
On 26 October 1994, CEDEC Transport, Inc. (CEDEC)
mortgaged two parcels of land covered by Transfer Certificate
of Title (TCT) Nos. 134327 and 134328 situated in Malibay,
Pasay City, including all the improvements thereon (properties),
in favor of BPI Family to secure a loan of ₱6,570,000. On the
same day, the mortgage was duly annotated on the titles under
Entry No. 94-2878. On 5 April and 27 November 1995, CEDEC
obtained from BPI Family additional loans of ₱2,160,000 and
₱1,140,000, respectively, and again mortgaged the same
properties. These latter mortgages were duly annotated on the
titles under Entry Nos. 95-6861 and 95-11041, respectively, on
the same day the loans were obtained.
Despite demand, CEDEC defaulted in its mortgage obligations.
On 12 October 1998, BPI Family filed with the ex-officio sheriff
of the Regional Trial Court of Pasay City (RTC) a verified petition
for extrajudicial foreclosure of real estate mortgage over the
properties under Act No. 3135, as amended.4
On 10 December 1998, after due notice and publication, the
sheriff sold the properties at public auction. BPI Family, as the
highest bidder, acquired the properties for ₱13,793,705.31. On
14 May 1999, the Certificate of Sheriffʼs Sale, dated 24 February
1999, was duly annotated on the titles covering the properties.
On 15 May 1999, the one-year redemption period expired
without CEDEC redeeming the properties. Thus, the titles to the
properties were consolidated in the name of BPI Family. On 13
September 2000, the Registry of Deeds of Pasay City issued
new titles, TCT Nos. 142935 and 142936, in the name of BPI
Family.
However, despite several demand letters, CEDEC refused to
vacate the properties and to surrender possession to BPI
Family. On 31 January 2002, BPI Family filed an Ex-Parte
Petition for Writ of Possession over the properties with Branch
114 of the Regional Trial Court of Pasay City (trial court). In its
27 June 2002 Decision, the trial court granted BPI Familyʼs
petition.5 On 12 July 2002, the trial court issued the Writ of
Possession.
On 29 July 2002, respondents Golden Power Diesel Sales
Center, Inc. and Renato C. Tan6 (respondents) filed a Motion to
Hold Implementation of the Writ of Possession. 7 Respondents
alleged that they are in possession of the properties which they
acquired from CEDEC on 10 September 1998 pursuant to the
Deed of Absolute Sale with Assumption of Mortgage (Deed of
Sale).8 Respondents argued that they are third persons claiming
rights adverse to CEDEC, the judgment obligor and they cannot
be deprived of possession over the properties. Respondents
also disclosed that they filed a complaint before Branch 111 of
the Regional Trial Court of Pasay City, docketed as Civil Case
No. 99-0360, for the cancellation of the Sheriffʼs Certificate of
Sale and an order to direct BPI Family to honor and accept the
Deed of Absolute Sale between CEDEC and respondents.9
On 12 September 2002, the trial court denied respondents’
motion.10 Thereafter, the trial court issued an alias writ of
possession which was served upon CEDEC and all other
persons claiming rights under them.
However, the writ of possession expired without being
implemented. On 22 January 2003, BPI Family filed an Urgent
Ex-Parte Motion to Order the Honorable Branch Clerk of Court
to Issue Alias Writ of Possession. In an Order dated 27 January
2003, the trial court granted BPI Familyʼs motion.
Before the alias writ could be implemented, respondent Renato
C. Tan filed with the trial court an Affidavit of Third Party
Claim11 on the properties. Instead of implementing the writ, the
sheriff referred the matter to the trial court for resolution.
On 11 February 2003, BPI Family filed an Urgent Motion to
Compel Honorable Sheriff and/or his Deputy to Enforce Writ of
Possession and to Break Open the properties. In its 7 March
2003 Resolution, the trial court denied BPI Familyʼs motion and
ordered the sheriff to suspend the implementation of the alias
writ of possession.12 According to the trial court, "the order
granting the alias writ of possession should not affect third
persons holding adverse rights to the judgment obligor." The trial
court admitted that in issuing the first writ of possession it failed
to take into consideration respondents’ complaint before Branch
111 claiming ownership of the property. The trial court also
noted that respondents were in actual possession of the
properties and had been updating the payment of CEDECʼs loan
balances with BPI Family. Thus, the trial court found it necessary
to amend its 12 September 2002 Order and suspend the
implementation of the writ of possession until Civil Case No. 99-
0360 is resolved.
BPI Family filed a motion for reconsideration. In its 20 June 2003
Resolution, the trial court denied the motion.13
BPI Family then filed a petition for mandamus and certiorari with
application for a temporary restraining order or preliminary
injunction before the Court of Appeals. BPI Family argued that
the trial court acted with grave abuse of discretion amounting to
lack or excess of jurisdiction when it ordered the suspension of
the implementation of the alias writ of possession. According to
BPI Family, it was the ministerial duty of the trial court to grant
the writ of possession in its favor considering that it was now the
owner of the properties and that once issued, the writ should be
implemented without delay.
The Court of Appeals dismissed BPI Familyʼs petition. The
dispositive portion of the 13 March 2006 Decision reads:
WHEREFORE, the instant Petition for Writ of Mandamus and
Writ of Certiorari with Application for a TRO and/or Preliminary
Injunction is hereby DENIED. The twin Resolutions dated
March 7, 2003 and June 20, 2003, both issued by the public
respondent in LRC Case No. 02-0003, ordering the sheriff to
suspend the implementation of the Alias Writ of
Possession issued in favor of the petitioner, and denying
its Urgent Omnibus Motion thereof, respectively, are
hereby AFFIRMED.
SO ORDERED.14
BPI Family filed a motion for reconsideration. In its 19 December
2006 Resolution, the Court of Appeals denied the motion.
The Ruling of the Court of Appeals
The Court of Appeals ruled that the trial court did not commit
grave abuse of discretion in suspending the implementation of
the alias writ of possession because respondents were in actual
possession of the properties and are claiming rights adverse to
CEDEC, the judgment obligor. According to the Court of
Appeals, the principle that the implementation of the writ of
possession is a mere ministerial function of the trial court is not
without exception. The Court of Appeals held that the obligation
of the court to issue an ex parte writ of possession in favor of the
purchaser in an extrajudicial foreclosure sale ceases to be
ministerial once it appears that there is a third party in
possession of the property who is claiming a right adverse to
that of the debtor or mortgagor.
The Issues
BPI Family raises the following issues:
A.
The Honorable Court of Appeals seriously erred in upholding the
finding of the Honorable Regional Trial Court that despite the
fact that private respondents merely stepped into the shoes of
mortgagor CEDEC, being the vendee of the properties in
question, they are categorized as third persons in possession
thereof who are claiming a right adverse to that of the
debtor/mortgagor CEDEC.
B.
The Honorable Court of Appeals gravely erred in sustaining the
aforementioned twin orders suspending the implementation of
the writ of possession on the ground that the annulment case
filed by private respondents is still pending despite the
established ruling that pendency of a case questioning the
legality of a mortgage or auction sale cannot be a ground for the
non-issuance and/or non-implementation of a writ of
possession.15
The Ruling of the Court
The petition is meritorious.
BPI Family argues that respondents cannot be considered "a
third party who is claiming a right adverse to that of the debtor
or mortgagor" because respondents, as vendee, merely stepped
into the shoes of CEDEC, the vendor and judgment obligor.
According to BPI Family, respondents are mere extensions or
successors-in-interest of CEDEC. BPI Family also argues that
the pendency of an action questioning the validity of a mortgage
or auction sale cannot be a ground to oppose the
implementation of a writ of possession.
On the other hand, respondents insist that they are third persons
who claim rights over the properties adverse to CEDEC.
Respondents argue that the obligation of the court to issue an ex
parte writ of possession in favor of the purchaser in an
extrajudicial foreclosure sale ceases to be ministerial once it
appears that there is a third party in possession of the property
who is claiming a right adverse to that of the judgment obligor.
In extrajudicial foreclosures of real estate mortgages, the
issuance of a writ of possession is governed by Section 7 of Act
No. 3135, as amended, which provides:
SECTION 7. In any sale made under the provisions of this Act,
the purchaser may petition the Court of First Instance (Regional
Trial Court) of the province or place where the property or any
part thereof is situated, to give him possession thereof during
the redemption period, furnishing bond in an amount equivalent
to the use of the property for a period of twelve months, to
indemnify the debtor in case it be shown that the sale was made
without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath
and filed in form of an ex parte motion in the registration or
cadastral proceedings if the property is registered, or in special
proceedings in the case of property registered under the
Mortgage Law or under section one hundred and ninety-four of
the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any
register of deeds in accordance with any existing law, and in
each case the clerk of the court shall, upon the filing of such
petition, collect the fees specified in paragraph eleven of section
one hundred and fourteen of Act Numbered Four hundred and
ninety-six, as amended by Act Numbered Twenty-eight hundred
and sixty-six, and the court shall, upon approval of the bond,
order that a writ of possession issue, addressed to the sheriff of
the province in which the property is situated, who shall execute
said order immediately.
This procedure may also be availed of by the purchaser seeking
possession of the foreclosed property bought at the public
auction sale after the redemption period has expired without
redemption having been made.16
In China Banking Corporation v. Lozada,17 we ruled:
It is thus settled that the buyer in a foreclosure sale becomes the
absolute owner of the property purchased if it is not redeemed
during the period of one year after the registration of the sale.
As such, he is entitled to the possession of the said property and
can demand it at any time following the consolidation of
ownership in his name and the issuance to him of a new transfer
certificate of title. The buyer can in fact demand possession of
the land even during the redemption period except that he has
to post a bond in accordance with Section 7 of Act No. 3135, as
amended. No such bond is required after the redemption period
if the property is not redeemed. Possession of the land then
becomes an absolute right of the purchaser as confirmed
owner. Upon proper application and proof of title, the
issuance of the writ of possession becomes a ministerial
duty of the court.18 (Emphasis supplied)
Thus, the general rule is that a purchaser in a public auction sale
of a foreclosed property is entitled to a writ of possession and,
upon an ex parte petition of the purchaser, it is ministerial upon
the trial court to issue the writ of possession in favor of the
purchaser.
There is, however, an exception. Section 33, Rule 39 of the
Rules of Court provides:
Section 33. Deed and possession to be given at expiration of
redemption period; by whom executed or given. - x x x
Upon the expiration of the right of redemption, the purchaser or
redemptioner shall be substituted to and acquire all the rights,
title, interest and claim of the judgment obligor to the property as
of the time of the levy. The possession of the property shall be
given to the purchaser or last redemptioner by the same
officer unless a third party is actually holding the property
adversely to the judgment obligor. (Emphasis supplied)
Therefore, in an extrajudicial foreclosure of real property, when
the foreclosed property is in the possession of a third party
holding the same adversely to the judgment obligor, the
issuance by the trial court of a writ of possession in favor of the
purchaser of said real property ceases to be ministerial and may
no longer be done ex parte.19 The procedure is for the trial court
to order a hearing to determine the nature of the adverse
possession.20 For the exception to apply, however, the property
need not only be possessed by a third party, but also held by the
third party adversely to the judgment obligor.
In this case, BPI Family invokes the general rule that they are
entitled to a writ of possession because respondents are mere
successors-in-interest of CEDEC and do not possess the
properties adversely to CEDEC. Respondents, on the other
hand, assert the exception and insist that they hold the
properties adversely to CEDEC and that their possession is a
sufficient obstacle to the ex parte issuance of a writ of
possession in favor of BPI Family.
Respondentsʼ argument fails to persuade the Court. It is clear
that respondents acquired possession over the properties
pursuant to the Deed of Sale which provides that for
₱15,000,000 CEDEC will "sell, transfer and convey" to
respondents the properties "free from all liens and
encumbrances excepting the mortgage as may be subsisting in
favor of the BPI FAMILY SAVINGS BANK."21 Moreover, the
Deed of Sale provides that respondents bind themselves to
assume "the payment of the unpaid balance of the mortgage
indebtedness of the VENDOR (CEDEC) amounting to
₱7,889,472.48, as of July 31, 1998, in favor of the
aforementioned mortgagee (BPI Family) by the mortgage
instruments and does hereby further agree to be bound by the
precise terms and conditions therein contained." 22
In Roxas v. Buan,23 we ruled:
It will be recalled that Roxasʼ possession of the property was
premised on its alleged sale to him by Valentin for the amount
of ₱100,000.00. Assuming this to be true, it is readily apparent
that Roxas holds title to and possesses the property as
Valentinʼs transferee. Any right he has to the property is
necessarily derived from that of Valentin. As transferee, he steps
into the latterʼs shoes. Thus, in the instant case, considering that
the property had already been sold at public auction pursuant to
an extrajudicial foreclosure, the only interest that may be
transferred by Valentin to Roxas is the right to redeem it within
the period prescribed by law. Roxas is therefore the successor-
in-interest of Valentin, to whom the latter had conveyed his
interest in the property for the purpose of redemption.
Consequently, Roxasʼ occupancy of the property cannot be
considered adverse to Valentin.24
In this case, respondentsʼ possession of the properties was
premised on the sale to them by CEDEC for the amount of
P15,000,000. Therefore, respondents hold title to and possess
the properties as CEDECʼs transferees and any right they have
over the properties is derived from CEDEC. As transferees of
CEDEC, respondents merely stepped into CEDEC’s shoes and
are necessarily bound to acknowledge and respect the
mortgage CEDEC had earlier executed in favor of BPI
Family.25 Respondents are the successors-in-interest of
CEDEC and thus, respondentsʼ occupancy over the properties
cannot be considered adverse to CEDEC.
Moreover, in China Bank v. Lozada,26 we discussed the
meaning of "a third party who is actually holding the property
adversely to the judgment obligor." We stated:
The exception provided under Section 33 of Rule 39 of the
Revised Rules of Court contemplates a situation in which a third
party holds the property by adverse title or right, such as that of
a co-owner, tenant or usufructuary. The co-owner, agricultural
tenant, and usufructuary possess the property in their own right,
and they are not merely the successor or transferee of the right
of possession of another co-owner or the owner of the
property.27
In this case, respondents cannot claim that their right to
possession over the properties is analogous to any of
these.1avvphi1 Respondents cannot assert that their right of
possession is adverse to that of CEDEC when they have no
independent right of possession other than what they acquired
from CEDEC. Since respondents are not holding the properties
adversely to CEDEC, being the latterʼs successors-in-interest,
there was no reason for the trial court to order the suspension of
the implementation of the writ of possession.
Furthermore, it is settled that a pending action for annulment of
mortgage or foreclosure sale does not stay the issuance of the
writ of possession.28 The trial court, where the application for a
writ of possession is filed, does not need to look into the validity
of the mortgage or the manner of its foreclosure. 29 The
purchaser is entitled to a writ of possession without prejudice to
the outcome of the pending annulment case.30
In this case, the trial court erred in issuing its 7 March 2003
Order suspending the implementation of the alias writ of
possession. Despite the pendency of Civil Case No. 99-0360,
the trial court should not have ordered the sheriff to suspend the
implementation of the writ of possession. BPI Family, as
purchaser in the foreclosure sale, is entitled to a writ of
possession without prejudice to the outcome of Civil Case No.
99-0360.
WHEREFORE, we GRANT the petition. We SET ASIDE the 13
March 2006 Decision and the 19 December 2006 Resolution of
the Court of Appeals in CA-G.R. SP No. 78626. We SET
ASIDE the 7 March and 20 June 2003 Resolutions of the
Regional Trial Court, Branch 114, Pasay City. We ORDER the
sheriff to proceed with the implementation of the writ of
possession without prejudice to the outcome of Civil Case No.
99-0360.
SO ORDERED.